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23 Nov 2016

Self-employed left behind in new pension reform

Workers in the gig economy could face a retirement with no pension unless the government adapts their flagship pension policy, the Guardian reports.

Following recent changes to the pension system, the number of employees eligible to save for their pension has increased tenfold. However, as the scheme currently automatically enrols anyone earning more than £10,000 into the program, there is concern that those who are self-employed or work in the ‘gig economy´ will not be able to save through the scheme.

The pensions minister, Richard Harrington, has acknowledged the faults; but as of yet has not clarified whether they will be part of the review planned for next year.

Steven Cameron, pensions director at insurer Aegon, noted that the government needed to keep up-to-date with the changing nature of self-employment.

“It is not sustainable government policy to exclude the self-employed, who are no longer made up solely of the traditional small business owner but now include a fast-growing contractor population.

“The differentiation between employed and self-employed has been further blurred by the gig economy and the recent ruling that Uber workers should be treated as employees,” he said.

Figures show that the number of self-employed workers who are actively contributing to a pension pot has fallen dramatically since the start of the century. In 2001-02 some 1.1 million workers were paying into their pensions, whereas by 2014-15 that figure stood at just 380,000.

Jon Greer, pensions expert at Old Mutual Wealth, stated: “The rapidly growing self-employed population aren´t saving enough for retirement and are sleepwalking towards poverty in later life.

“The government needs to step in and help. Ahead of the conservative party conference in October, Theresa May ordered a review of employment regulation and practices, but action is also needed.”

Elsewhere, Tim Sharpe, policy officer at the TUC, commented: “Automatic enrolment has been a great success, giving 6 million more people access to a workplace pension.

“But it mustn´t be allowed to become a policy that works well for men in traditional full-time work but excludes others. Millions of low-paid workers, most of them women, are still missing out. We need to remove the barrier of the earnings trigger so that the millions of workers in part-time work, including those holding down multiple jobs, are automatically enrolled into workplace pensions too.”

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